BHP says looking inside and out for CEO successor

James Regan

6 IN. DI LETTURA

SYDNEY (Reuters) - BHP Billiton (BHP.AX) (BLT.L) said it is looking inside and outside the company as well as using external advisers to help with succession plans for its chief executive, following reports the world’s biggest miner was preparing for changes at the top.

Chairman Jac Nasser told BHP’s Australian annual general meeting on Thursday that planning for a successor to CEO Marius Kloppers had started the day he was appointed and was ongoing.

Kloppers oversaw phenomenal growth during the final boom years of the last decade and, despite failing to complete at least three major deals, won plaudits from investors for reining in costs and maintaining shareholder payouts.

But BHP now faces a sharp drop in profits as it battles a tougher environment after a slowdown in top customer China has knocked commodities prices.

“If he is replaced, I only hope they choose someone from inside and not someone that parachutes in, because we need a CEO that understands this company,” said Ian Mancovitch, a BHP shareholder attending the meeting in Sydney.

“Sure, Marius Kloppers is yesterday’s man, but that doesn’t mean he isn’t needed anymore, he proved that during the global financial crisis,” he added.

“As part of the executive development process we identify high potential people at various levels both inside and outside the company on an ongoing basis,” Nasser said, adding BHP used its own human resources people and external advisers.

Nasser praised Kloppers for his leadership during the financial crisis.

“This sort of performance doesn’t happen by accident,” Nasser said. “It is a credit to every one of our 100,000 people led by Marius and his team,” Nasser said.

The company has not said when it expected the 50-year-old South African to leave, but identified succession planning for all its senior executives as a top priority following a report that a search for a replacement had begun.

FORFEITED BONUS

An analyst at a fund manager, who asked not be named, played down the impact on Kloppers’ position of the talk of succession as a normal part of a company’s leadership transition.

“One of the benefits that BHP has is it has great depth of senior management, whereas you couldn’t make the same comment about some of the smaller companies in the market.”

BHP could face stiff competition in any external hunt from Anglo American (AAL.L), which is also searching for a new chief executive after dropping Cynthia Carroll.

Under BHP’s dual Australian-United Kingdom listings, BHP’s headquarters must be in Australia, and its chief executive must spend 51 percent of his or her time in the country, further limiting the field.

“Everything is possible, but a replacement for Marius won’t be easy,” said a investment fund manager who has had contact with the chief executive over some of his biggest deals.

“He is regarded as one of businesses’ best managers, the one who very aptly steered BHP through the financial crisis.”

Kloppers faced criticism for failing to clinch three major bids he launched — a full takeover of rival Rio Tinto (RIO.AX)(RIO.L), a merger with Rio Tinto’s iron ore business and a bid for Canada’s Potash Corp POT.N — and then splashing $17 billion on two shale gas takeovers in the United States just before gas prices slumped.

He gave up his bonus this year after BHP took a $2.8 billion charge on the value of its shale gas assets.

An early exit would spare Kloppers the task of overseeing a prolonged period of sliding profits. Based on estimates, BHP’s profit is not expected to get back to the high of 2011 for at least another five years.

In 2012/13, BHP’s bottom line is tipped to tumble by some $4 billion to just under $15 billion due to lower minerals prices.

Kloppers’ longevity is also under threat from a marked shift mandated by Nasser away from revenue generation to cost control.

This was made evident by board decisions this year to suspend expansions in copper at Olympic Dam and iron ore via the now-stalled development plan at Port Hedland’s outer harbor.

For his part, Kloppers told the meeting that BHP was in a strong financial position.

“This despite the challenges of higher capital and operating costs, stronger producer currencies and more regulation as well as volatility in commodity prices,” Kloppers said.

ELUSIVE TAKEOVERS

As an 18-year-old conscript in the South African army, Kloppers reportedly carried his ailing German Shepherd tracker dog through the Angolan desert rather than let it die.

In his business career, he has also tried to beat the odds, especially when mounting takeovers, such as when he took on international regulators — and some of his own major customers — in launching the hostile bid for Rio Tinto in 2008.

He later dumped the deal, partly due to anti-trust concerns and the global financial crisis.

BHP went back for another try, lining up an iron ore joint venture with Rio Tinto that would have yielded $10 billion in savings. That deal had to be pulled after regulators blocked it.

Undaunted, Kloppers turned his sights on Potash Corp, the world’s largest fertilizer-maker, but there too he was thwarted, this time by the Canadian government.

Nonetheless, some shareholders may be thankful.

Before his tenure, BHP squandered billions of dollars in past decades by making disastrous forays into U.S. copper mining and by betting on new-fangled ways to make nickel and iron ore.

(This story has been corrected to remove reference to Xstrata in paragraph 14.)